Posts Tagged ‘ERP Benefits’

Aberdeen Research recently released a report entitled “Roll With The Punches: Select Flexible ERP and Be Prepared for Business Challenges.” In it, they highlight key benefits they have documented in organizations deploying what they call “flexible” ERP systems. Among the highlights…

“Best-in-Class” organizations are 83% more likely to have an ERP solution that can be quickly tailored to reflect business change.

Those organizations in turn are 59% more likely to be able to monitor regulatory compliance.

They are 3 times as likely to be able to tailor interfaces to reflect user preferences.

And they saw a 15% improvement in operational costs as a result of their solution.

Flexible here denotes a system that is “easily tailored to reflect business change.” The concepts of customizable and modifiable come into play, along with the built-in flexibility accorded by today’s more modern ERP systems, which include features like drill-downs, dashboards and business intelligence, and triggers or alerts.

The firm looked at key reasons that companies replace their systems. The two big ones:

Obsolete technology foundation or infrastructure of their current system

Lack of features

Aberdeen went on to list the ratios of improvement in operations that were seen by firms who implemented new systems, and their results are notable. According to a table from their August, 2014 research results, they include the following results when companies deployed such “flexible” systems:

45% improvement in inventory turns

24% change in stock to sales ratio

15% change in operational costs

13% improvement in administrative costs

20% improvement in complete and on-time delivery

14% improvement in inventory levels

16% improvement in internal schedule compliance

19% improvement in cycle time of key business processes

As organizations grow, Aberdeen concludes, it is necessary to change their technology as well. As they note in conclusion: “ERP is the key technology used to support an organization. Ultimately, flexible ERP creates a flexible organization that can take on any new challenges.”

According to the “2015 Enterprise Solution Study” recently published by Mint Jutras, which bills itself as “an independent research-based consulting firm that specializes in analyzing the business impact of enterprise applications,” there are a handful of key criteria that most businesses use for ERP implementations.

According to the study, buyers tend to select from two ‘troughs’ – one from the Hot Features category of ERP offerings and (more importantly, one suspects) one from the Features That Matter To Buyers category. Among the latter, key criteria reported by buyers include:

fit and function

completeness of the solution for all enterprise functions, and

the quality of built-in reporting and analytics

Clearly, features and capabilities dominate the list. According to the survey, at the bottom of the list was ‘social capabilities,’ with mobile access and rapid deployment ranking just above it.

Jutras concludes that while some of these newer features (i.e., social, mobile) are potentially important offerings, they apparently are not as important as those key criteria above, and customers are not willing “to give up the mainstay criteria in order to get them.”

They conclude their post – and we quote directly from it – as follows…

“In the end… the top two goals remain reducing inefficiency in doing business and monitoring and improving KPIs. Whether they are operational measures like cost management, inventory costs, and cycle times or customer-facing factors like on-time delivery and customer retention, ERP should be a key tool for achieving improvements. If your organization is not seeing adequate benefits, now is always a good time to start asking why.” As Jutras writes:

“If you have not realized [world class] results, it is either because you ignore the potential (we still find a disturbing number of companies that don’t measure results), or because your ERP implementation isn’t living up to its full potential. Ask yourself: Is that because of your ERP solution or because of you?”

This month’s APICS Magazine (Mar/Apr ’15) presented what we thought was an ideal example of the utility of an ERP system combined with a little Excel expertise in defining the benefits such a powerful combination can bring. In an article titled Steady Supply and Demand, APICS Managing Editor Elizabeth Rennie writes of a bearing manufacturer that was able to get a much better handle on matching order demands with supply capacity.

The company had extended lead times due in part to capacity constraints that could negatively affect sales opportunities and on-time deliveries, as well as causing increased expediting costs. Basically, sales planners needed better visibility over inventory and production, and the shop floor wanted consolidated purchase orders for all sales units in order to identify potential capacity issues.

The solution was a report – drawn from the central repository of data found in the ERP system, matched with an Excel report to parse, filter and report the desired results, and all based on foundational APICS training and knowledge. In other words, APICS taught them how to look, and the report they designed gave them the visibility they were looking for.

The company needed to know “what products were made on what production line, how many machines were on each line, and what capacity was available on each machine.” Once they had that, their team could identify the items and SKUs associated with each product and inventory group code. They then added a field to the ERP system’s item master card where the production line code was assigned to the SKU.

An Excel prototype served as the output format, and with some programming effort (at our firm, we’d think in terms of Jet Reports of course), orders and forecasts were extracted and mapped to a table of production line assignments. After validation, the report was introduced to both sales and factory teams as a “source of reference to make capacity planning and investment decisions at the factory.”

Employees get real time visibility into production line use and can drill down to order details. It enables a high level of responsiveness to issues like constraints, machine downtime, order changes and the like. Their report evolved and grew to display available capacity and backlog development, so planners can recognize potentially damaging trends before the damage is caused.

And of course, because the report is built from the company’s single, trusted silo of uniformly available data – its ERP system – and then tested and validated, all users gain a ‘trusted’ view of orders and current plant capacity, in real time. As the article points out, “this establishes trust among operational units that often have conflicting priorities.” (Sound familiar?)

Just one more fine example of how ERP and a little clever modification and reporting can yield improved business performance and customer responsiveness.

In this our final post based on Panorama Consulting’s 2013 survey of 172 companies that deployed ERP systems recently, we come to ‘lessons to be learned’ from those firms who did not execute their deployments within their anticipated budges for either time or money. Their 5 key reasons and suggestions for remedy follow, buttressed in some cases by our own, usually matching, observations:

Budgets and timeframes that do not take into account business process improvement, organizational change management and customizations. To correct this they suggest companies create a business case and devote adequate resources to ensure accurate project planning.

Leadership teams that choose systems based on reputation or vendor sales pitches rather than systems that truly fit their “future state” requirements. To correct this, companies should leverage independent (outside) resources to conduct full requirements gathering, business process improvements, and software evaluations and negotiations.

Leadership teams that fail to anticipate the magnitude of the project and the impact it has on end-user productivity and / or morale both prior to and following software implementation. To correct this management should first create a business containing goals and measurement tools [KPIs, or key performance indicators – measuring the handful of things that really matter in your firm] and ensure strong management planning and execution.

Non-customized training that is based solely on the technical aspects of the system and fails to train users on new processes. The solution of course is to engage your implementation partner to perform training customized to each key work area and its processes. This is training that is anything but generic.

Lack of concerted communication to end-users about the reasons behind the implementation, the anticipated benefits stemming from successful adoption and the ways in which each individual end-user and executive will affect project success or failure. The solution: create and follow a comprehensive organizational change management plan.

Our reading of Panorama’s survey results only serves to reinforce our own observations after 25 years of ERP implementations, and their conclusions generally match up with our own. Hence, we are pleased to deliver this four-part synopsis of their survey to our readers.

To read the full text of their 21 page report, you can access Panorama’s research results here. You may need to register (it’s free) first. And of course, your input and comments are always welcome in the Comments area of our blog.

In this second last in a series recapping Panorama Consulting’s 2013 survey of 172 companies that deployed ERP systems recently, we come to their conclusions about costs and timelines, along with how well they realized their intended or anticipated benefits. In the spirit of ‘brief recap’ we present the short versions of their findings…

Budget

The good news: Over three-fourths of all projects were either under budget, on budget, or at least only ‘reasonably’ over budget. Only about 6% were over budget by 50% or more. Most over-budgets were due to changes in project scope. It is again worth noting that about half the respondents were big companies doing big projects (see part one of this post series) – we’re talking multi-million dollar projects. The survey appeared to have no way to discern between large project overruns and those of the smaller (SMB) size clients.

Project Durations

Here Panorama found that about two-thirds of projects were completed either ahead of schedule, on time, or over schedule by less than 25%. On average, clients expected projects of 14 months duration, and they lasted about 18.

Panorama also noted in its findings that over the last four years the rolling average of ERP cost as a percent of revenue of respondents is 5.5%. By that metric, a ten million dollar (revenues) company might thus expect a project cost of about $500,000.

Project Benefits

The results from this year’s survey reflected a drop in benefits realization compared with the year prior. 25% saw no benefit or did not have a business case to compare to in the first place (bad planning!). Another 25% received 50 to 100% of expected benefits. The other half received less than 50%.

The five most common benefits companies expressed (all achieved by around half the respondents) were: availability of information; improved productivity; increased interaction; improved data reliability; and less duplication of effort.

Timeline to Recoup

Over 40% of respondents reported that they had recouped their full system implementation costs within 36 months. What was troubling was the fact that about half (in roughly equal measures) had either not recouped their costs or did not know. This again points to a probable lack of prior business planning, business case development, or identification of project goals.

The good news is that payback costs have declined steadily in each of the past four years, from 32 months (2009) to 30 (2010) to 28 (2011) to 25 (2012).

In our next and concluding post, we’ll take a look at 5 key takeaways that any company can benefit from when planning their own ERP implementation. Stay tuned…

In our prior post we looked at the state of satisfaction of ERP system buyers according to the most recent (2013) survey by Panorama Consulting. We identified and recapped how things went on nearly 200 companies’ deployments across a spectrum of businesses, including their overall satisfaction, how well the systems met their anticipated needs, and how they did on cost and time budget overruns.

Today we’ll look at how they felt about various ERP software vendors, what types of systems clients chose to deploy and how they used consultants. Since it’s a fairly long report, we’ll cut to the chase with key conclusions…

ERP Vendors

About 60% of ERP deployments reported being at least moderately satisfied (or better) with their ERP vendor. Often Panorama found (as have we) that most of the others are expressing a disconnect between what they were promised during the sales pitch, and what they actually achieved. Here again, clearly defined requirements and a roadmap would alleviate much of this disconnect.

The systems most often selected to be shortlisted (i.e., make the cut to the final round) were of note, we thought. The top two were SAP and Oracle – both of which are very high end systems aimed at very large companies. This may be why Panorama’s “average” implementation costs were well into the millions. As we noted earlier, about half the companies surveyed fell into the category of being large enough to be candidates for SAP and Oracle, i.e., companies with $300 million to $1 billion in revenues.

In our own world, the SMB (small to midsize business) market is our only concern. Here it’s interesting then to note that the next most favorably viewed systems, in order, came from Microsoft, Epicor and Infor, with Microsoft (Dynamics) having been both shortlisted and having been the final selection more frequently than the others by a fair margin.

Type of ERP Software

While all the hype in the media these days seems to about ‘cloud’ applications, only about one in six respondents said any part of their system was hosted in the cloud. Concerns over security breaches, lack of knowledge and risk of data loss were most frequently cited as the concerns. Over six in ten selected the more traditional ‘on-premise’ deployment.

More tellingly, despite cloud solutions touting themselves as being less expensive than traditional ERP implementations, the majority of respondents admitted to minor or no savings. True cost of ownership over time tends to minimize the expected cost savings potential of cloud based systems.

Consultants

Consultants were used by respondents during virtually all of the phases of deployment, from initial planning, through software selection, implementation, training and support. They were brought in most frequently to “manage the implementation” as well as to supplement internal resources, to be a “strategic partner from planning through implementation” and to provide “organizational change management support.” Panorama concludes its consultants’ analysis by noting that “if an organization wants to do it right, chances are it will need a high degree of third-party guidance to light its way.”

In our next post, we’ll recap what the survey concluded about ERP budgets, benefits and time to recoup costs. Stay tuned…

Recently the research team at Panorama Consulting concluded its annual survey of satisfaction among ERP customers for their systems. Their team looked at key factors including duration of implementation, how many were over budget or long on time, and how satisfied these customers were with their systems. We thought we’d recap a few of their key findings in today’s post, given that this is the time of year when many firms give serious consideration to upgrading their own systems.

For the record, Panorama received 172 responses to their survey and we should note that about half of these companies were pretty large, in terms of revenues and thus project complexity, length and cost of deployment as well. Still, about half the respondents indicated they had under 100 users and revenues of under $50 million; about one-third overall were under $25 million. On the high end, about 30% were over $300 million in revenues, so any kind of averaging of system costs is certainly going to be skewed upwards by the companies with revenues from $300 M to one billion.

But even given the diverse range of respondents, certain conclusions stand out. For instance, over the four years of surveys conducted by Panorama, the fact is that nearly 60% of projects have exceeded their planned budgets… over half have exceeded their planned implementation durations… and only about half have received even 50% of the planned benefits they had anticipated from their software initiatives. That’s not a strong endorsement.

When we look at why companies implement a new system in the first place, no single reason stands out (the largest response were from the 17% who said “to improve business performance”) but others included replacing an old system; better integrating across multiple locations (but then, half the survey companies were multinationals); positioning the company for growth; better serving customers; ensuring compliance; and making peoples’ jobs easier. Collectively, all these factors accounted for about 85% of all the reasons given for implementing a new system.

In an interesting disconnect we noticed, there seems to be a disparity between the percent of respondents who said they did not received the anticipated benefits (over 50%) and those who in the end still reported “overall satisfaction” (86%, a 5 point improvement over 2012 results). In fact, only 60% reported their projects as a “success” but another 30% were “neutral, or did not know.” This likely points to a lack of having started with a good business case. Or it could simply represent a ‘work in progress.’ Or it might be a lack of post-implementation audit or introspection. (Maybe everyone was so exhausted at the end of the deployment that they simply didn’t want to take the time…)

Ultimately, and happily one supposes, only about 10% reported their project as a “failure.” In the end, Panorama delivers a fair assessment, which we’ll quote verbatim:

The fact that the majority of respondents self-described as “satisfied” with their ERP software selection, yet cannot translate that satisfaction into individual components, points to a cloudy definition of “satisfaction” among organizations. Companies that do not use a business case – and thus do not measure actual project results against any expected benefits – likely have a harder time defining success or failure for the company, various functional areas or even individuals. Clear communications to end users and stakeholders about the goals of the ERP project, expected benefits and actual results can create a more unified and realistic satisfaction and success measures.

In our second of four posts on this topic, we’ll take a look at what Panorama found regarding vendors, types of software and consultants. Stay tuned…